This October, the average price of a brand-new apartment across greater Tokyo reached 67.5 million Yen, the highest level seen for the month of October and 10% higher than the bubble-era in 1990.
In Tokyo’s 23 wards, the average price was 84.55 million Yen, up 11.8% from last year. Back in 2002, the average price across greater Tokyo was just 40.04 million Yen. In 2020 it had reached 60.83 million Yen, just shy of 1990’s record of 61.23 million Yen.
So, what’s the reason behind the high property prices in Japan’s capital? An NHK report on November 28, listed four contributing factors:
- The coronavirus pandemic
- Double-income households
- Labor shortages in the construction industry
- Rising cost of land and construction materials
Since the start of the pandemic in 2020, there has been growing demand from buyers seeking to leave their cramped rental apartments and buy more comfortable homes and apartments. Record low interest rates for home loans, tax breaks, and a relatively low unemployment rate have created an ideal environment for new home buyers. Remote work has not been widespread, and homebuyers are still preferring to stay in Tokyo’s 23 wards where they have convenient access to transport, shopping and schooling for children.
The rise in double-income households has boosted spending power by home buyers, and banks offer pair loans for joint borrowers.
One of the major factors in the pricing of new housing is the cost of construction. For apartment developers, this includes the cost of acquiring development sites, labor and construction materials. For the past several years, land, wages and materials have remained high with little likelihood of a drop in prices in the near future. This means there is little leeway for developers to reduce prices. The majority of developers are giant conglomerates that don’t engage in fire sales, either.
Source: NHK, November 28, 2021.
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